What are your expectation from the forthcoming budget, especially for the mid-market, economy and budget segment?
Emergence of the mid-market, economy and budget segment is something very recent, a little over a decade. Prior to that, the hospitality industry was catering largely to the luxury, premium and upscale segments and therefore the government and state policies were designed in a way to cater to these segments. However, in the past 5-6 years, the domestic market restructured itself completely to fit to the changing market economy.
A number of hoteliers restructured their properties and even came up with differentiated products in order to reach to a wider section of people. Since the budget to mid-market scale were non-existent, there isn't any policy that caters to the interests of these segments. The government, I feel, should come up with rules, laws and regulations which are designed to cater to the mid-market, economy and budget segments.
How exactly a differentiated policy going to help?
The government needs to come out with different set of rules for the mid-market, economy and budget categories, otherwise it will not be sustainable for these segments. If you look at it, the entire cost structure for these segments is different, the tariff structure is different, the investment structure is different and also the ability to recover on the investment is altogether of a different nature.
For example, the cost of a budget hotel is Rs 18 lakh per key minus the cost of land. While nobody can do anything about the land cost, one definitely can work on how many licenses a budget or an economy hotel needs to obtain.
The same yardstick in terms of rules of obtaining licenses cannot be similar to that with the upscale, premium and luxury hotels. There has to be some differentiation to attract more investments. At present, the numbers of licenses obtained by the mid-market, economy and budget segment is same as the luxury segment.
3. The industry has been lobbying for long to get the infrastructure status. Why do you feel the status is not been given to the sector?
The hotel industry comes under the ministry of tourism. The infrastructure status are usually given to those industries which are providing the basic infrastructure facilities such as transport, road, power, etc.
Tourism, on the other hand, has never been considered as infrastructure. But it gets some benefits of the export sector. Once India returns to a high growth trajectory, travel and accommodation will be an indispensable part of the growing economy. The need is therefore to make it a priority sector.